SAFE HARBOR 401(k) PLANS More savings, less hassle SAMPLE The “Safe Harbor” plan is our most popular 401(k) retirement plan for businesses with employees. Safe Harbor plans make it easy for business owners to maximize contributions to their own accounts while reducing some of the limitations associated with adhering to IRS non-discrimination testing. www.webmerge.me The Safe Harbor plan allows you to: • Contribute the maximum annual deferral amount ($18,000) to your own 401(k) plan • Receive additional savings from your company’s matching contributions (you’re an “employee” too!) • Avoid the hassles of IRS non-discrimination testing SAMPLE Get tax deductions for your matching contributions More good news: come tax time, your business can deduct all matching contributions (within the deductibility limitations imposed by the IRS) to employee accounts. And don’t forget, matching contributions increase retention of current employees, and are a great recruiting tool for prospective hires. www.webmerge.me Satisfy IRS testing To satisfy non-discrimination testing, your business will need to contribute to both your 401(k) account and your employees’ accounts. Companies that choose a Safe Harbor plan must either: • Make a dollar-for-dollar match on the first 3% of an employee contribution and .50 cents on the next 2% of employee contribution for a total of 4% contribution. (this is the most popular option), OR • Contribute 3% of the employee’s compensation for each eligible employee, regardless of whether the employee chooses to participate in the plan. • Safe Harbor plans work particularly well for companies that have consistent streams of revenue. Businesses finding it difficult to maintain matching funds year-round might find that a 401(k) plan without Safe Harbor may make more sense. SAMPLE www.webmerge.me